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Fighting Tax Refund Fraud

BY U.S. SENATOR JOHN BOOZMAN –

After filing his 2014 tax return, Russellville resident John expected to receive a refund from the Internal Revenue Service (IRS). Instead of getting his money, he got a letter notifying him that someone filed a tax return under his name using his Social Security number. As a victim of identity theft (IDT), he’s forced to file more paperwork with the IRS before he gets his tax refund, a process that can be lengthy. He’s one of several Arkansans who reached out to my office for help getting their refund after thieves filed a fraudulent tax return using their information.

Unfortunately, IDT has become an increasingly common practice by thieves and costly for taxpayers. In 2013 and 2014, the IRS received more than 725,000 IDT cases. The agency estimates it paid $5.8 billion in fraudulent refunds in 2013. The reality is that the IRS may never know the full cost of fraudulent refunds.

The technical struggles at this agency make the IRS an easy target. For example, the IRS sent 355 tax returns to the same Lakewood, Colorado address that amounted to more than $1 million in fraudulent tax returns according to a 2013 Inspector General report.

The IRS must do more to stop tax fraud, prevent this abuse of taxpayer dollars and detect fraudulent payments. The agency has taken steps to address this problem by implementing more filters to identify questionable returns. Despite IRS estimates that it prevented $24.2 billion in fraudulent identity theft (IDT) refunds in 2013, there continues to be room for improvement.

IRS needs to stay one step ahead of crooks to protect taxpayer dollars. In 2014, the Government Accountability Office (GAO) made recommendations for updates to collecting and tracking tax returns. A recent GAO report said the agency plans to require electronic file providers to submit device identifications number with each e-filed tax return beginning next year.

As the chairman of the Appropriations Financial Services and General Government (FSGG) subcommittee that has jurisdiction over funding of the IRS, I will continue to provide oversight and make sure the IRS is taking appropriate steps to prevent IDT fraud and protect taxpayers.

Earlier this month the Taxpayer Advocate Services, an IRS division that helps taxpayers resolve problems with the IRS, released its mid-year report expressing concerns that the IRS is not doing enough to assist victims of identity theft.  The report reiterated a previous recommendation that the IRS assign a single point of contact for taxpayers whose returns have been impacted due to IDT.

 This would help reduce the confusion that I have heard from one taxpayer who is the victim of IDT. She shared with me the stack of correspondence she’s received including two very similar letters from the IRS.

Hardworking American taxpayers trust the IRS to protect their personal information and pay tax refunds to the rightful claimant. We can and must improve our tax system by preventing tax fraud and providing John and other victims of IDT the assistance they need.

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